Wonkbook: The Tea Party takes over; the GOP's $3.9 trillion tax plan; small business bill moves

Voter rage! Anti-incumbent fever! A shocking upset! Ovide LaMontagne has an awesome name! But this is Wonkbook, so let's talk about the implications for policy. Sorry, sorry.

The immediate impact is that the GOP became that much less likely to take over the Senate in November. A clear Republican win in Delaware became a likely Republican loss. But though that's getting all the headlines, it slightly misses the point: The long-term impact of these primaries is not going to be on the incumbents who have been defeated. It'll be on the incumbents who survived.

It was hard for incumbent Republicans to see Sens. Bob Bennett and Lisa Murkowski unexpectedly toppled in their primaries. But Alaska and Utah are conservative, quirky states. They were likely targets for an angry conservative electorate. The same cannot be said for Delaware, a moderate state that often goes blue. Rep. Mike Castle's defeat was proof that no heterodox Republican is safe from a primary defeat -- it doesn't matter how popular you've been, or how clearly purple your electorate was. You're not safe. You're never safe.

Politicians are, by nature, a fearful species. But their nightmares became a lot more specific last night. The Tea Party, for all its unexpected successes, cannot topple every incumbent Republican in the country. But by toppling the right ones, it can make every incumbent Republican vote and speak and act with the Tea Party in mind. So though the Te Party isn't likely to send all that many of its own Republicans to Washington, the likely outcome of last night's primaries is that the Tea Party takes over the Republicans who are already in Washington, and don't want to be sent home.

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Dan Balz explains it all: "Christine O'Donnell, a 'tea party'-backed long-shot candidate, stunned the Republican establishment Tuesday night by defeating nine-term Rep. Michael N. Castle in Delaware's GOP Senate primary, one of the most shocking upsets in an already tumultuous primary season...The outcome was the latest in a string of embarrassments for the Republican establishment this year, underscoring the civil war that continues to rage in the party. Last month, Sen. Lisa Murkowski of Alaska lost her primary to political newcomer Joe Miller, who like O'Donnell had the support of Palin and tea party activists. Last spring, tea party forces defeated Sen. Robert F. Bennett of Utah at the Republican state convention."

"Those were the most prominent Republicans to fall to the grass-roots movement that is roiling the party, but hardly the only ones. Establishment-backed candidates in Kentucky, Nevada, Colorado and Connecticut also lost in their primaries, and in Florida, Gov. Charlie Crist bolted the party rather than risk losing the Senate nomination to conservative Marco Rubio. "

Republicans' new tax plan will increase the deficit by $3.9 trillion, reports Lori Montgomery: "Aides to McConnell said they have yet to receive a cost estimate for the measure. But the nonpartisan Congressional Budget Office recently forecast that a similar, slightly more expensive package that includes a full repeal of the estate tax would force the nation to borrow an additional $3.9 trillion over the next decade and increase interest payments on the national debt by $950 billion. That's more than four times the projected deficit impact of President Obama's health-care overhaul and stimulus package combined."

Obama's small business lending bill broke a filibuster, reports Brady Dennis: "The 61-37 vote paves the way for final Senate passage of the aid package, which includes a $30 billion lending fund and about $12 billion in tax relief for small businesses. The longstanding logjam over the legislation ended thanks to Sen. George Voinovich (R-Ohio), who had said he would join Democrats in helping push the small-business incentives through the Senate because the economy was 'really hurting.' Democrats heaped praise Tuesday on Voinovich, who was joined by fellow Republican George LeMieux (R-Fla.) to help Democrats eclipse the 60 votes needed to overcome the threat of a filibuster."

More families are making use of the safety net due to the recession, reports Sara Murray: "As recently as the early 1980s, about 30% of Americans lived in households in which an individual was receiving Social Security, subsidized housing, jobless benefits or other government-provided benefits. By the third quarter of 2008, 44% were, according to the most recent Census Bureau data. That number has undoubtedly gone up, as the recession has hammered incomes. Some 41.3 million people were on food stamps as of June 2010, for instance, up 45% from June 2008. With unemployment high and federal jobless benefits now available for up to 99 weeks, 9.7 million unemployed workers were receiving checks in late August 2010, more than twice as many as the 4.2 million in August 2008."

Still to come: Felix Rotahyn makes the case for a national investment bank; the vote on stripping EPA powers has been canceled; the DREAM Act will receive a vote next week; and a dog and a cat cover pop songs.

Lazard CEO Felix Rohatyn argues for a national infrastructure bank: "A national infrastructure bank could begin to reverse federal policies that treat infrastructure as a way to give states and localities resources for projects that meet local political objectives rather than national economic ones. The bank would evaluate prospective infrastructure projects on consistent terms. It would be able to negotiate with state or local sponsors of a project what their cost shares should be. The bank also could help groups of states come together for regional projects such as high-speed rail and better freight management. Such consolidation would improve project selection. "

Small businesses aren't better job engines than big companies, writes Ruth Marcus: "A study that Acs conducted for the SBA found that 'most, if not all, of the growth in employment comes from the 300,000 high-impact firms in the economy over any four-year period. Depending on the time period studied, this is about evenly split between firms with fewer than 500 employees (the SBA definition of small business) and firms with more than 500 employees. Therefore, it would appear that both small and large firms contribute about equally to employment growth.'"

Steve Pearlstein sees bank regulators learning their lesson from the crisis: "Regulators claim that they now see the folly of their over-reliance on market indicators, such as quarterly profits or current asset values, in assessing the financial health of a bank or the quality of its loans. Supervisors have been told to be more forward looking in their analysis and less optimistic in their assumptions about future profits and prices. Particularly for the larger institutions, the focus now is as much on the overall business strategy of the bank as it is on a review of the loan book. 'The challenge is: How do you institutionalize skepticism?' said Dan Tarullo, the Fed governor and onetime critic who is now spearheading a top-to-bottom overhaul of the Fed's bank supervision."

The income gap persists, but African-Americans are increasingly on the right side of the happiness gap, writes David Leonhardt: "In 1975, per capita black income was 41 percent lower than per capita white income. Since then, the gap has shrunk only modestly, to 35 percent. The black unemployment rate today is nearly twice as high as the white rate, just as it was in 1975. And by some measures — family structure, college graduation, incarceration — racial gaps have actually grown. But now a new study has found that there is one big realm in which black Americans have made major progress: happiness."

A schedule change has saved Democrats a vote on stripping the EPA of its powers over climate change, reports Darren Samuelsohn: "Sen. Dianne Feinstein (D-Calif.), chairwoman of the subcommittee in charge of EPA’s budget, issued a statement blaming the delay on a $100 million amendment offered by the White House Monday affecting the reorganization of the Interior agency that oversees offshore drilling permits and revenue. But Republicans quickly labeled Democrats as chickens, saying the schedule change was really about EPA."

Henry Waxman promised action on climate change come 2011, reports Darren Samuelsohn: "'I think we’ve got to get away form looking at this issue as a partisan issue,' Waxman said. 'Unfortunately it has become partisan, as has everything become partisan. Even the Republican voters seem in their minds to identify the [climate] science as somewhat partisan. But I think the issue is becoming more and more serious and people are realizing it, which I hope will increase the pressure on the Congress to take the actions we need to.'"

Utility companies are fighting over how to finance renewable energy absent federal action, writes Andrew Restuccia: "Utilities recognize the shift to green energy as a major growth prospect. But they also recognize an impediment: Infrastructure. Indeed, across the country, utility and energy companies are preparing for a massive fight over how to deliver clean energy to people’s homes -- and, more to the point, who will pay for the necessary infrastructure to get the energy there. Behind the scenes, in recent months, utilities have battled over how to allocate the costs of the new high-powered electric lines necessary to move wind energy from one part of the country to the other."

French "feed-in tariffs" requiring renewable energy actually save money, writes Paul Gipe: "French feed-in tariffs for wind, hydro, biogas, and other technologies not only did not cost money in 2008, but also saved French ratepayers five million euros ($6.4 million) through the year. Conventional wisdom suggests that as more and more renewables are added to a utility's generating mix, the average cost of electricity increases. Thus, as France adds more renewable energy from its program of differentiated feed-in tariffs, the cost of the program should steadily increase. In 2008, Cécile Bordier at the French bank Caisse des Dépôts examined the cost of France's renewable energy program. Bordier found that, on the contrary, the cost of the French program was declining as renewable generation was growing."

The DREAM Act will be proposed as a defense bill amendment next week, reports Carrie Budoff Brown: "The DREAM Act provides a path to citizenship for young undocumented immigrants if they were in the United States before age 16, and if they have been residents for five years before enactment of the law. Reid could not say whether he has 60 votes to overcome a filibuster but added, 'I sure hope so.'...Democrats need some Republican votes, yet it's unclear if any will step forward. Sen. Richard Lugar (R-Ind.), a Republican co-sponsor, has not yet indicated whether he supports adding the DREAM Act as an amendment to the defense bill, his spokesman said Tuesday. Sen. John Cornyn (R-Texas), a target for Democrats, will not make a decision until he reviews the bill language, his spokesman said."

A federal judge will allow states' challenge to health care reform to advance, reports Jennifer Haberkorn: "U.S. District Judge Roger Vinson scheduled oral arguments to begin Dec. 16 in Pensacola, Fla., but did not say which parts of the lawsuit he will approve. Vinson said he plans to issue a complete ruling by Oct. 14...The Obama administration asked Vinson to throw out the lawsuit, arguing that only individuals have the standing to challenge the requirement and that states can opt-out of the Medicaid program if they don’t want to meet the new rules."

A small change in a child nutrition bill would save $100 million in subsidies to baby formula companies:http://bit.ly/9rnAQw

Tom Coburn is blocking a food safety bill, reports Meredith Shiner: "Majority Leader Harry Reid (D-Nev.) told reporters Tuesday he believed the bipartisan legislation -- which gained momentum over recess as thousands of Americans fell ill from more than half a billion contaminated eggs -- could pass within the next 24 hours....Coburn's office confirmed to POLITICO Tuesday that the Republican is objecting to moving forward on the bill on the grounds that it will add to the burgeoning federal budget. Coburn has become the GOP champion for demanding that legislation be fully paid for, staging or threatening filibusters this year on legislation ranging from war spending to unemployment benefits."

Closing credit: Wonkbook is compiled with the help of Dylan Matthews and Mike Shepard. Photo credit: Rob Carr-AP.

"The immediate impact is that the GOP became that much less likely to take over the Senate in November."

Alas, it's true. And it's not particularly the extremism of some of the tea party candidates as much as it is the, um, overall quality of those candidates.

At the same time, the GOP establishment--which generally urinates on the base, takes the grass roots for granted, and despises the blogosphere--is getting exactly what it deserves.

At the same time, the right-wing base might end up cutting off its nose to spite its face. It was hard for incumbent Republicans to see Bob Bennett and Lisa Murkowski were not liberal. Not even close. I think some of the tea party folks are confusing thoughtful conservatism with RINO-ism. But, maybe not. Joe Miller, who ousted Murkowski, is (thus far) a high-quality candidate with good ads and an impressive resume. It's the Angles and O'Donnells who will prove to be the problem. Angle may be the best example--a once-in-a-lifetime opportunity to easily defeat a powerful and symbolic Democrat (in the form of Harry Reid) may end up being squandered because tea partiers threw their support behind the more emotionally satisfying nutbucket.

For the most part, I would agree with conservatives who have argued that the Republicans frequently suffer from accepting the common wisdom that, over much of the country, they have to run Rinos and mavericks to win, because rock-solid conservatism is too unpalatable. And this is the idea behind booting a Castle in favor of an O'Donnell. The problem is, O'Donnell is not actually a good candidate, and may not even be an ideological conservative. Definitely not a Ronald Reagan or a Bill Buckley, I'll say that much.

However, I would argue that the left and the Democrats need to tone down the "O'Donnell's win is good for the Democrats" and "this means a near-sure victory for the Democrats in November" stuff. A little of that goes a long way. Too much of playing into the O'Donnell-as-underdog narrative is likely to help her. Especially against Chris Coons. Too much and even embittered Castle supporters might say, "You know what? Eff you!" and pull the lever for O'Donnell.

It looks like Ezra Klein and his JournoList buddies' plan to just pretend that Obama's radical views are "moderate and mainstream" and pretend that the views of moderate Republicans lke John McCain and George W. Bush are somehow "radically to the right" has backfired.

The country could not be moving more fast to the right then they currently are.

"Even the Republican voters seem in their minds to identify the [climate] science as somewhat partisan."

I don't think it's the science, or climate science, they see as a partisan issue so much as the predictions of inevitable man-made doom, Costnerian views of our future waterworld, and solutions that require a pervasive redistribution of wealth. That's the partisan part.

Although I certainly understand the rhetorical advantage of framing anthropogenic climate change deniers as opposing science.

"and pretend that the views of moderate Republicans lke John McCain and George W. Bush are somehow "radically to the right" has backfired."

john mccain proves the butterfly effect exists.
what a sequence of events.
i still believe that bill clinton opened the door to the moral majority, which opened the door to george w bush.
and john mccain, in his desperation to win, opened the door to sarah palin.
it was his random choice of sarah palin, that has directly caused all of this.
hard to imagine that events can just be so masterfully, yet randomly orchestrated.

if people are not energized to see the danger inherent in all of this, i dont know what will happen to us.
will we be overtaken by events, and just watch?

some people make things happen.
some people watch things happen.
some people wonder what happened.

"I don't think it's the science, or climate science, they see as a partisan issue so much as the predictions of inevitable man-made doom, Costnerian views of our future waterworld, and solutions that require a pervasive redistribution of wealth. That's the partisan part."

In addition, watching Democrats in Congress consider adding a millionaire's tax bracket or seeing this insane 1099 provision in the health care bill which raises all of $17 billion, while the federal gas tax languishes at 18.4 cents, suggests that Democrats themselves don't consider climate change to be much of a problem.

Yes, raising the gas tax (and taxing dirty electricity) would be politically unpopular (although less so if it were offset by lower taxes elsewhere), but all that does is confirm in my mind that for most Democratic politicians, the risk of being unpopular ranks as a more serious problem than climate change.

To the extent the Feds are going to empty my pockets anyway, discouraging carbon emissions rather than discouraging work/investment would be a Pareto improvement.

so much for the talk that Republicans were pandering to a tea party base for no reason. in fact it was funny because progressives threatened 30 some Dems that didn't vote for healthcare and not one of them lost in a primary but a good number of Republicans did. Seems to suggest that the Republicans aren't far enough RIGHT for a good many of their constituents (or at least the constituents don't believe they are.

The short-run is that Dems won't lose quite as many seats (especially in the Senate) but the long run implications are that the country is moving more right in 2010 than they moved left in 2008.

Now, I realize that trying to explain simple economics to progressives like Ezra and Lori is not an easy task. Their view of the world is very narrow, and they believe economic decisions are always made in a vacuum. So let me try two paths to reach them....

First, set up a lemonade stand outside your office. On the first day, charge $0.50/glass. On the second day, charge $5.00 a glass. Tell me which day generates the most revenue.

Or, let's take Lori and Ezra's math (that extension of tax cuts equals lost revenue for the Treasury) to it's locial conclusion. If raising tax rates back to pre-Bush-tax-cut rates will raise dollar-for-dollar revenue, then I have an even better idea....how 'bout we double the tax rates! Think of all the cash that will flow into the treasury....they won't know where to start spending it all!

Of course people in the real world with common sense (which apparantly necessarily excludes columnists at the Post) understand that tax rates influence behavior. Behavior of investors, behavior of business owners....raising tax RATES does not necessarily drive increased revenues. In fact, increasing RATES may threaten economic activity. And if economic activity shrinks further, higher RATES may actually lead to LESS revenue.

If you want facts, look at the 1960's, and 1980's. President John F. we-cant-tax-our-way-to-prosperity Kennedy, and President Reagan both REDUCED tax rates, and the following years saw INCREASED REVENUES to the Treasury.

Now, I realize Ezra abhores actually having to talk economic facts and history because he prefers to stick to his progressive philosophy textbook, but I just had to throw that out there to ruin his day.

"Behind the scenes, in recent months, utilities have battled over how to allocate the costs of the new high-powered electric lines necessary to move wind energy from one part of the country to the other."

Grrrrr. This is where stimulus infrastructure spending should have gone, and not into putting windows on empty buildings. Obama and the Democrats blew it big time. We could have built the equivalent of the interstate highway system for the 21st century. A project that would pay for itself many times over, and instead we got..... windows on empty buildings.

Did you know that long ago, two liberal professors named Cloward & Piven proposed a path to convert USA's capitalist economy & limited-government democracy into a communist system by simply passing legislation that traps the nation into a path of bankruptcy?

Did you know that Cloward & Piven were guests at the White House when President Bill Clinton signed the community re-investment act?

Did you know that the Community Reinvestment Act was the single piece of legislation responsible for the majority of high-risk home loans that contaminated the assets of major US banks and triggered a global economic meltdown?

Did you know that that global economic meltdown was responsible for sweepinig a radical community activist named Barack Obama into the White House where he architected major pieces of legislation that has commited more tax payer money to be spent in the future than our economy can ever expect to pay off?

JKAREN - you got it right.....

some people make things happen.
some people watch things happen.
some people wonder what happened.

It can also be paid for by borrowing $1, and taxing $1+r in the future. The present value of that tax liability is $1.

$1 can be printed, and that dollar effectively transfers purchasing power away from the private sector and provides it to the public sector, also a tax.

The Republican plan reduces the amount of taxes paid directly over the period in question by $3.9 trillion. The actual tax cut depends entirely on spending cuts. If spending remains the same, the actual tax liability is unchanged.

I oppose deficits on two grounds:

It is easier to run up large spending bills in the present if the onerous tax bill is kicked down the road. There is the illusion of getting something for nothing.

If the debt becomes too onerous, there is a high risk of default (either by very high inflation or outright default, which is roughly the same thing - a 100% tax on bondholders, though the inflation tax also hits other types of assets). Default of either type causes severe market dislocations on top of the cost of the tax.

As a practical matter I'd prefer spending and direct taxes to be as low as possible, but if spending is high I'd rather have the taxes upfront as opposed to putting it on the credit card.

no, i didnt know about the professors cloward and piven.
what i did know, during the clinton administration, is that the country was in a fantasyland, and just looking at the stock pages, it wasnt hard to know that everything would come crashing down, shortly.
i believe that the clinton administration could have put the brakes on this. i hold the clinton administration responsible for a lot of the consequences we are suffering now.
i dont think that president obama is a "radical community organizer." the fact that you characterize him in that way, makes me suspicious of your thinking. i dont think barack obama is a radical person.
i think he inherited a disaster after the clinton administration and the terrible ineptitude and neglect of the bush years.
and unfortunately, i cannot talk about the economy with you.
i really have no understanding of what the heck is going on anymore....even though i keep reading and trying to understand.
i know that we needed health care reform, and i also believe that president obama saved us from a terrible economic disaster....and i think that the republicans are doing everything they can to obstruct a recovery, and it will backfire on them, if they dont try to improve things for the american people.
they will not be coming back, and they will be replaced by dangerous people.
i just know that the country is in grave trouble.
but there are some things that i do know, just from being a human being in the world.
and i know that christine o'donnell, sarah palin, glenn beck, rand paul, paladino and angle are dangerous people.
and what i do know, is that republicans in congress should take this as a wake up call, to work with the democrats, to do everything they can to get us somewhat out of the hole we are in now, or they will not be coming back to washington, and the hopes for our future, will be in the hands of maniacal people.
i have much more confidence in the obama administration, than any of the other folks out there.
although, i think we are economic and cultural and spiritual trouble in this country.
and things could get worse.
maybe, by some miracle, they will get better.
sometimes, that happens.
sorry, probably not the answer you were looking for, fasteddie. my understanding of human nature, is better than my understanding of economics. although maybe it all comes down to the same thing.

at any rate, fasteddie, i am off to work with children now, in a homeless shelter.
we are putting sequins on pumpkins today and making beautiful stars to hang on ribbons.
maybe that is what i understand of economics and human nature.

jkaren - God bless you. You are truly a saint for your devotion to children in a homeless shelter.

I would urge you to consider the following:

If your local grocery store increases the cost it charges for a piece of candy, do you think there will be less consumers buying a piece of candy?

If your government charges more money on those who try to launch a profit-seeking enterprize do you think there will be less profit-seeking enterprizes?

Where does the government get the funds that allow it to pay for subsidized healthcare programs from the poor?

If every year there are less and less profit-seeking enterprizes for the government to tax in order to raise money for programs to aid those who are trapped in poverty, will eventually the poor be worse and worse off?

I urge to consider the value of SUSTAINABILTY.

The USA is the most wonderful nation to have ever existed. Please do not take for granted that it will always exist. And please do not take for granted how much better off the poor are here in the USA as compared to the poor and powerless in despotic nations like North Korea, Venezuela, Cuba, Iran, Russia, China, etc.,.,

I urge you to not only be vigilant to win battles to help the poor. Please be vigilant about winning the ultimate war on behalf of human liberty over repression.

George Soros is paying enormous sums of money to people like Ezra Klein to trick you into thinking that Christine O'Donnell, Sarah Palin, Glenn Beck, rand paul, paladino and angle are dangerous people.

They'll be happy to learn that they've tricked you. If you do not belileve you have been tricked, than prove it....watch/listen to a week of Glenn Beck and decide first hand for yourself.

"Rep. Mike Castle's defeat was proof that no heterodox Republican is safe from a primary defeat -- it doesn't matter how popular you've been, or how clearly purple your electorate was. You're not safe. You're never safe."

Yeah, but only in this election. In a wave election, someone like O'Donnell may win and the Tea Party will get a bunch of headlines and the establishment GOP will be super scared.

But what happens in 2016 if the economy keeps improving? In a world where the moderate, proven Republican candidates had won in 2010, they'd be cruising to re-election in 2016. But because the Tea Party is obsessed with beliefs rather than whether their candidate is knowledgeable or has staying power, we might be cruising toward a fourth wave election -- not because of the electorate's mood, but because the Tea Party candidates are not tested, proven, or all that knowledgeable. The Tea Party exists solely because of the economy, and without that, the electorate will see that they're terrible politicians and even worse policymakers.

Democrats should be pleased that this recession is producing a conservative movement with the shortest possible shelf life. The next six years of gridlock, and improving economy, will make this an interesting historical footnote showing voter anxieties about the economy (among other things).

I have been continually surprised for the past year that nobody else has been remarking on the exact similarity between "Tea Party" extremists and bolshevism. The agitators have successfully politicized the proles (middle class elderly whites in this cases) to attack the Dumas (GOP) as counterrevolutionary.

The Tea Party represents a rebirth of American Exceptionalism. Many of us believe that when Jefferson wrote the Constitution, the limited-government that resulted amounted to an advance in the evolution of the human race. Never before had a government formed around the notion that we had God-given unalienable rights.

The human race suddenly formed a government that provided access to human dignity.

Kevin, I've never really understood what the Republican base has to be unhappy about: they Republicans cut taxes got involved in a bunch of not-very-useful wars, and are full bore climate-change denialists. Seems pretty much what makes the base happy. You'd think they'd be satisfied with hat.

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